Monday, 30th October 2017

E- paper

Move to slash gas rates by 26%

This will be the second reduction in six months to the lowest since 2014

  • Published 1.04.20, 12:58 AM
  • Updated 1.04.20, 12:58 AM
  • a min read
  •  
Natural gas prices are set every six months — in April 1 and October — based on average rates in gas-surplus nations such as the US, Russia and Canada. (Shutterstock)

Domestic natural gas prices were cut by a steep 26 per cent, the lowest since the formula-driven pricing was introduced in 2014. The cut will dent the revenues of producers such as ONGC and Oil India, but lower the prices of CNG and piped cooking gas.

The oil ministry’s Petroleum Planning and Analysis Cell (PPAC) said the bulk of India’s existing gas production will be priced at $2.39 per million British thermal unit for the six-month period beginning April 1, down from $3.23 as of now. This will be the second reduction in six months to the lowest since 2014.

The price of gas produced from difficult fields in the deep sea too has been cut to $5.61 from $8.43 per mmBtu now.

The Telegraph on March 9 had reported that the gas prices would be cut by more than 20 per cent because of the slump in global gas prices.

Natural gas prices are set every six months — in April 1 and October — based on average rates in gas-surplus nations such as the US, Russia and Canada.

The rate is calculated by taking a weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia, with a lag of one quarter.

The reduction in natural gas prices would mean lower raw material cost for compressed natural gas (CNG) and natural gas piped to households (PNG) and should translate into a reduction in retail prices. It would also mean lower feedstock cost for power generation and the manufacturers of fertilisers.

However, this could impact the revenue of oil PSUs, which produce 83 per cent of the domestic gas.

Other producers such as RIL, Vedanta and Hindustan Oil Exploration Company would also see their revenue go down.